Covered foreign currency loan(redirected from Covered Foreign Currency Loans)
Covered foreign currency loan
Covered Foreign Currency Loan
A loan made in a currency other than the one in which the borrower usually operates. For example, a borrower in the U.S. may take out a loan in pounds sterling to finance new operations in the U.K. The loan is "covered" because the parties use a foreign currency forward contract, an agreement in which the parties agree to trade certain currencies in the future at a given exchange rate to hedge against foreign exchange risk.